Wharton Insights 02: When Wealth gets Complicated
As family wealth grows across generations, so does the complexity behind it. Julian Boaden, Founding & Managing Partner of Bodewise Cottonfield, shares further reflections from his participation in the Wharton Family Office Program at the University of Pennsylvania.
In the second article of our four-part series, he explores why family governance is less about rules and formal structures than about trust, clear responsibilities and the ability to make difficult decisions together.
Julian, in the first article you described the family itself as its greatest asset. How does growing wealth challenge family unity?
The interesting thing about family wealth is that success makes family life more complicated for a specific reason: shared assets turn a family into a decision-making body, whether or not its members would ever have chosen to be one. And with every generation, that body gets larger and more diverse.
A growing business, substantial investments or an inheritance create opportunities. But they also bring new expectations, responsibilities and sometimes competing interests.
In the first generation, decisions may be relatively straightforward. The founder knows the business and often has the final say. Two generations later, there may be several family branches, different shareholders and individuals with entirely different ambitions.
The wealth may have grown, but the way decisions are made has not necessarily evolved with it. One insight reinforced by the Wharton Family Office Program is that families need to develop their decision-making capabilities alongside their financial wealth.
Where do you see the greatest risks?
Not necessarily where people would expect them. Families spend considerable time analyzing investment risks, market volatility and financial exposure. Yet some of the most consequential risks are much closer to home.
Unspoken expectations, unclear responsibilities and unresolved disagreements can gradually undermine family trust. These issues may remain invisible for years, particularly while a strong family leader is in place. They tend to surface during succession, inheritance or major business decisions.
The real risk is not that family members disagree. Disagreement is inevitable. What matters is whether they have an established way of resolving their differences.
“THE BIGGEST RISK IS NOT DISAGREEMENT. IT IS THE INABILITY TO RESOLVE IT.”
So is governance essentially about preventing family conflicts?
That is part of it, but I would look at it more broadly. Good governance creates the conditions for families to make decisions together, even when their interests differ. It clarifies responsibilities, participation and decision-making authority.
Take a family business. One sibling may be running the company, another may be an active shareholder and a third may have pursued an entirely different career. Their roles are different, and so are their expectations.
Treating everyone identically is not necessarily fair. But decisions need to follow principles that everyone understands. Governance cannot eliminate difficult conversations, but it can make them more constructive.
Could too much governance lead to overengineering?
Absolutely. Governance should simplify decision-making, not make it more complicated. When every decision requires a committee and every responsibility is governed by detailed rules, governance can quickly become an obstacle rather than a solution.
Excessive formalization can slow down decisions, discourage personal initiative and even undermine the trust it was intended to strengthen. A family constitution, a family council or clearly defined processes can be extremely valuable – provided they serve a genuine purpose. Good governance should provide direction without becoming a constraint. And it must evolve as the family evolves.
How do shared values translate into actual decisions?
That is where things become interesting. Most families can agree on values such as trust, fairness, responsibility and respect. The real test comes when those values point towards different choices.
Imagine a family deciding whether to reinvest profits in the business or distribute capital to shareholders. Both positions may be entirely legitimate. One prioritizes entrepreneurial growth, the other financial independence.
Shared values alone will not resolve that decision. But they provide a foundation for agreeing on how the decision should be made. Who has the authority? Whose interests need to be considered? And what happens if there is no consensus? For me, this is what makes governance practical. It turns principles into a way of working together.
What does this mean for the role of a modern family office?
I believe one of the most valuable contributions a family office can make is to address questions that families may find difficult to raise themselves.
At Bodewise Cottonfield, we recognize that effective governance goes beyond financial considerations. It requires an understanding of family relationships, individual expectations and shared priorities. Our role is to facilitate constructive dialogue and create the clarity and confidence families need to move forward together. Ultimately, governance cannot be delegated to a family office. The family must own the decisions and the principles behind them.
If there is one piece of advice you would give families, what would it be?
Do not wait for a difficult decision to discover that you have no agreed way of making it. The best time to discuss responsibilities, expectations and decision-making is when relationships are strong and there is no immediate pressure.
Governance is not about anticipating every possible conflict or controlling every aspect of family life. It is about building the trust, understanding and structures that allow families to navigate change. Because preserving wealth is one thing. Preserving the ability to make decisions together, across generations, is quite another.